Multi-Continent Deal Rumored for AT&T, Verizon, Vodafone

By Bryan Chaffin

Apr 2nd, 2013 3:08 PM EDT

Verizon and AT&T are reportedly in talks with Vodafone in a three way merger deal that would see Verizon as the sole owner of Verizon Wireless in the U.S. and AT&T with Vodafone's European operations. Citing unnamed sources, The Financial Timesreported that the deal would value Vodafone at US$245 billion, a 40 percent premium for Vodafone and the largest M&A deal in history.

As noted above, the sources aren't named and DealReporter published a statement from Verizon denying the report. Accordingly, take the story for what you will, but we wanted to offer a look at the story from the iPhone owner viewpoint.

If you're on Verizon, this rumor coming true probably wouldn't make much difference. For instance, most Verizon Wireless customers have no idea that Vodafone owns a 40 percent stake in the U.S. wireless arm of Big Red in the first place. Verizon owning all of it will matter more to Wall Street than the company's customers.

AT&T doesn't currently have European carrier operations, but the company has expressed European ambitions in the past. Should Ma Bell be allowed to buy Vodafone's European business, she would finally achieve that goal. For U.S. jet-setters, this could eventually mean easy iPhone user in the U.S. and most of Europe without the hassles of roaming plans.

Vodafone customers in Europe might get to know the joys of having AT&T as your carrier. This might not necessarily mean dropped calls and poor network coverage, however, as Europe's higher population density will still make coverage easier on the Continent.

So why this complicated three-way deal? FT's Bryce Elder reported that dividing up Vodafone's U.S. and European holdings could be more palatable to regulators in both markets. By pooling their collective corporate assets, AT&T and Verizon can also more easily swallow the premium it would take to make the deal happen. $245 billion is a lot of money even to Apple, and dividing the risk with multiple parties will make Wall Street happier.

We believe that despite the corporate denials already coming there is some fire behind this smoke. The three companies might not necessarily be close to a deal, but Verizon and Vodafone have been trying to work out something for the Verizon Wireless joint venture for the past eight years.